You have been asked to calculate the debt ratio for a firm that has the following components

Question:

You have been asked to calculate the debt ratio for a firm that has the following components to its financing mix:
• The firm has 1 million shares outstanding, trading at $50 per share.
• The firm has $25 million in straight debt, carrying a market interest rate of 8%.
• The firm has 20,000 convertible bonds outstanding, with a of $1,000, a market value of $1,100, and a rate of 5%.
Estimate the debt ratio for this firm.
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...